In the insurance field, insurance coverage for individuals is generally offered and issued either on an individual basis to a named individual insured, or to a group of individuals. The group is typically a group of employees of an employer, but may include other types of groups such as associations, unions, clubs fraternal organizations and other types of groups.
Group benefit policies make various types of insurance coverage available to any individual in the group, generally with guaranteed issue or minimal underwriting. Various coverages including life, long-term disability, short-term disability, dental care, vision care and critical illness are often available. Critical illness benefits may provide that the insured is entitled to a lump sum payment upon diagnosis of a serious medical condition, such as certain cancers, heart attack, serious illnesses or conditions affecting other vital organs, and the like.
In many such policies, an individual may be permitted a single claim for critical illness benefits in a lifetime. From an underwriting perspective, there is a high risk of an individual who has been diagnosed with a critical illness being diagnosed with a second critical illness. For example, an individual who has had a heart attack is at much higher risk than the general population of a second heart attack or another serious condition affecting the heart or circulatory system. Accordingly, insurance companies tend not to offer coverage for a second claim, as there is likely to be little or no interest in purchasing coverage at appropriate premium levels given the risk.
Some insurance companies make recurrence benefits available. Thus, an insured who suffers a heart attack and receives a lump sum payment under the critical illness benefit may, upon suffering a second heart attack or receiving a diagnosis of cancer, after a suitable waiting period, be able to receive a second payment under the same policy. The second payment may be lower than the first payment, and may be the final payment available to the insured under the critical illness policy.
It is desirable to provide critical illness benefits in group benefit policies that provide an incentive for the insured to continue the policy after receiving a benefit, wile providing reasonable management of insurer risks.